EU leaders have given Greece until the end of the weekend to reach an agreement with its creditors or face crashing out of the euro.
Athens formally submitted a request for a new three-year bailout to the eurozone’s €500bn bailout fund on Wednesday, the first of many steps it has to complete before eurozone and EU leaders gather in Brussels on Sunday to decide its fate.
Here are the other deadlines it has to meet to salvage its place in the single currency and avert the biggest crisis in the EU’s history.
In their letter to the bailout fund, known as the European Stability Mechanism, Greek authorities vowed to “set out in detail its proposals for a comprehensive and specific reform agenda” by Thursday.
These are the “prior actions” that so bedevilled the bailout talks before Alexis Tsipras, the Greek prime minister, walked away from the negotiating table and called a referendum on the creditors’ proposal last month.
Eurozone leaders have warned that these new prior actions must be more comprehensive than those negotiated only two weeks ago — for an obvious reason. The previous bailout talks were over a single, final €7.2bn tranche in Greece’s old bailout.
These reforms will be part of a new, multiyear programme — the kind of thing that is normally negotiated over a period of weeks, if not months.
Under the treaty governing the ESM — Greece’s two previous bailouts were granted before the bailout fund even existed — the European Commission “in liaison with the ECB” must evaluate any request for aid before it goes to national capitals for consideration. With time running out, that evaluation must occur in just 24 hours, on Friday.
Angela Merkel, the German chancellor, went out of her way on Tuesday to highlight the issues the commission must consider in its evaluation — including whether there is a “risk to the financial stability of the euro area as a whole”, a line Berlin insisted on during the debate over the ESM treaty. Germany has long argued that bailouts should only be forthcoming if the entire eurozone is threatened.
In many ways, this is a more critical day than Sunday’s summit. Under the ESM treaty, it is the ESM’s board of governors — the eurozone’s 19 finance ministers — who decide whether formal negotiations should begin. Under the timetable agreed by eurozone leaders on Tuesday night, eurozone finance ministers will meet on Saturday to make this very determination.
If the board of governors decide there is enough in the Greek proposal to start talks, they then task the trio of bailout monitors — the European Commission, ECB and “whenever possible” the IMF — to start talks over a new “memorandum of understanding”, a politically poisonous phrase in Greece that has come to stand for the tough austerity measures the country has lived under for the last five years.
If eurozone finance ministers agree to start bailout talks, Sunday’s summit of EU leaders may not even be needed, according to eurozone officials.
After all, despite Mr Tsipras’ repeated insistence that a “political agreement” was needed at the highest levels, almost all bailout decisions are delegated to finance ministers.
But if no deal is struck on Saturday, leaders from all 28 EU countries have been summoned to Brussels to sort out the mess on Sunday.
According to EU officials, one of the most important things they will be asked to decide on is a humanitarian relief programme for Greece, something that may be needed amid rising shortages of medicines and, potentially, food and fuel.
This day will look very different depending on whether Grexit has been avoided or not. If a deal gets the green light from finance ministers on Saturday, there are several countries — including Germany, Finland and the Netherlands — which still need parliamentary approval before such permission is officially granted.
This has always been a concern in Germany, where Ms Merkel’s own Christian Democratic bloc has grown increasingly restive.
The Bundestag, which is currently on a month-long July recess, will have to be called back into session on Monday, to vote on any agreement. If no deal is agreed at the weekend, Monday’s focus instead turns to the ECB.
With the prospect of a major Greek government default and bankruptcy imminent, the central bank’s governing council will in all likelihood be convened to withdraw the €89bn in emergency loans currently keeping Greek banks alive. Grexit would ensue.
Greeks woke up to shuttered banks, closed cash machines and a climate of rumors and conspiracy theories on Monday as a breakdown in talks between Athens and its creditors plunged the country deep into crisis.
After receiving no extra emergency funding for Greek lenders from the European Central Bank, Prime Minister Alexis Tsipras somberly announced capital controls in a televised address on Sunday night to prevent banks from collapsing under the weight of mass withdrawals.
Greece has less than 48 hours to pay back 1.6 billion euros ($1.77 billion) of International Monetary Fund loans, and a default would set in train events that could lead to the country’s exit from the euro currency bloc.
But after Tsipras angered Greece’s international lenders by announcing a snap referendum next Sunday on the terms of a cash-for-reforms deal, hopes of a last-minute breakthrough are fading fast. Greeks reacted with a mixture of disbelief and fear.
“I can’t believe it,” said Athens resident Evgenia Gekou, 50, on her way to work. “I keep thinking we will wake up tomorrow and everything will be OK. I’m trying hard not to worry.”
European officials sent confusing signals about their next move. A spokesman for the European Commission told French radio that Brussels would not make any new proposals on Monday, appearing to contradict comments by EU Economics Commissioner Pierre Moscovici. He said a new offer was forthcoming and that the two sides were “only a few centimeters” away from a deal.
European bank shares fell sharply on Monday. Top banks in Spain, France and Germany were down more than 6 percent as the risk of a spillover to banks in other peripheral euro zone countries spooked investors.
The Greek government will keep banks shut at least until after July 5, the date of the referendum, and withdrawals from automated teller machines — which are shut on Monday — will be limited to 60 euros a day when they reopen on Tuesday. The stock exchange will also stay shut.
After months of wrangling, Greece’s exasperated European partners have put the blame for the crisis squarely on Tsipras’s shoulders.
The creditors wanted Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.
As Tsipras announced the emergency measures late on Sunday, there were long queues outside ATMs and petrol stations as people raced to take out cash before it was too late.
“I’ve got five euros in my pocket, I thought I would try my luck here for some money. The queues in my neighborhood were too long yesterday,” said plumber Yannis Kalaizakis, 58, outside an empty cash machine in central Athens on Monday.
“I don’t know what else to say. It’s a mess.”
Newspapers splashed pictures of long lines outside cash machines on their front page. The Nafetemporiki daily headlined Monday’s edition “Dramatic hours” while the Ta Nea daily simply said: “When will the banks open”.
The conservative-leaning Eleftheros Typos newspaper accused Tsipras of announcing the referendum as a ruse to tip the country into early elections in the hopes of winning them.
“Mr Tsipras’s decision to call a referendum and a possible euro exit constitutes a premeditated crime,” it said in an editorial. “It is clear that Mr Tsipras has lost the trust of citizens. That’s obvious from the queues at ATMs and petrol stations, and it will become obvious at next Sunday’s ballot.”
As rumors flew about, dozens of pensioners queued outside at least two offices of the National Bank of Greece on Monday after hearing they could withdraw pensions from some branches. They were turned away, Reuters photographers said.
“I’ve worked all my life, only to wake up one morning to a disaster like this,” said one shop owner, who was there to collect his wife’s pension.
Despite the financial shock, parts of daily life went on as normal, with shops, pharmacies and supermarkets in the city opening and Greeks meeting to discuss their country’s fate at cafes and restaurants. Tourists gathered as usual to watch the changing of the presidential guard outside parliament.
A rally to protest against austerity measures and urge voters to say “No” in the referendum on bailout terms is expected later on Monday.
Despite the hardening of positions, officials around Europe and the United States made a frantic round of calls and organized meetings to try to salvage the situation.
U.S. President Barack Obama called German Chancellor Angela Merkel, and senior U.S. officials including Treasury Secretary Jack Lew, who spoke to Tsipras, urged Europe and the IMF to come up with a plan to hold the single currency together and keep Greece in the euro zone.
The German and French governments announced emergency political meetings.
“While the program is active until Tuesday, they aren’t providing the necessary liquidity for Greek banks just to blackmail and to terrorize us,” Administrative Reforms Minister George Katrougalos told Antenna television.
“If we vote a yes, they will demolish pensions, you will have to pay for medicare in public hospitals. When your kids can’t go to school you will say ‘thanks’ and they will say ‘you asked for it’.
“But if you say no you have the ability to fight for a better future.”
Chancellor Angela Merkel on Friday pleaded with Greek premier Alexis Tsipras to accept an “extraordinarily generous offer” from international creditors, making clear there was no alternative and that she would not intervene directly to broker a compromise.
Speaking at the end of an EU summit in Brussels, Ms Merkel said that she and French president François Hollande had “asked and urged” the Greek leader face-to-face to “take the remaining step” to reach agreement with the bailout monitors.
But Mr Tsipras rejected the creditors’ offer, saying Greece would not be threatened with “blackmail and ultimatums”. He flew back to Athens on Friday evening to consult his cabinet and ruling Syriza party.
The mood of intransigence boded ill for a meeting of eurozone finance ministers on Saturday intended as a last-ditch attempt to reach a deal that would extend Greece’s bailout and unlock €15.3bn in urgently needed aid. That includes €7.2bn that has been withheld since the end of last year.
Greek officials said they refused an offer of a five-month extension of the bailout that would have funded the government until the end of November. According to a memo obtained by the Financial Times, the extension would be funded by “repurposing” €6.9bn in rescue funds set aside for bank recapitalisations and using it for general government expenses.
Unless creditors and Athens break the stalemate, Greece will be heading for a possible run on its bank as soon as Monday, the imposition of capital controls and default. On 30 June, Greece is due to make a €1.5bn debt repayment to the International Monetary Fund and the eurozone portion of its bailout will end.
Eurozone officials said Saturday’s meeting would also discuss a so-called “plan B” to ringfence Greece and protect the rest of the eurozone if Athens did not accept the creditors’ plan.
According to EU officials, Mark Rutte, the Dutch prime minister, told his fellow leaders at an EU summit on Thursday night that they might need to reconvene to discuss Greece — not to negotiate, he said, but to deal with the fallout from a Greek default.
The Greek government earlier in the day refused to abandon its latest proposals for a one-off, 12 per cent tax on all corporate profits above €500,000 and a rise in employee pension contributions. Bailout monitors believe the plans would crimp economic growth and in their own final offer earlier insisted on other savings measures.
The EU summit debate on Greece on Thursday evening was short but pointed, according to officials. Mr Tsipras reiterated his belief that the creditors’ plan would stifle growth and ignored the democratic mandate he received in January’s elections.
He again lashed out at the “extreme opinion of the IMF”, which many officials viewed as part of a campaign to divide the fund from its eurozone counterparts.
But Mr Tsipras received little support in the room, officials said. Particularly tough were the prime ministers of other countries that have gone through bailout programmes: Ireland, Portugal and Spain.
In a sign of the exasperation with Greece’s stance after a week of tortuous stop-go negotiations, EU leaders rebuked Mr Tsipras’ departing comments about blackmail.
Donald Tusk, the European Council president, said: “It is not political blackmail when we repeat day after day that we are very close to the day when the game is over.”
GREECE has delayed a key debt payment to the International Monetary Fund due today, the first time in five years that it has postponed a repayment on its 240 billion euro bailout.
The standoff between Greece and the IMF intensified as Athens informed the global lender that it plans to bundle four payments due this month into a single 1.6 billion euro (£1.2bn) lump sum, payable on June 30.
“Under an Executive Board decision adopted in the late 1970s, country members can ask to bundle together multiple principal payments falling due in a calendar month,” IMF spokesman Gerry Rice said in a statement.
The drastic measure is the first time in history that a western nation has resorted to bundling IMF debt repayments.
But Mr Tsipras faces fury at home from leftist supporters who helped him into power in January on a promise to end austerity, if he accepts the current terms attached to the cash by officials.
He returned from late night talks with EU officials in Brussels to face an outcry over conditions that would breach the “red lines” his Syriza party has declared.
The move to delay the repayment is also likely to dent relations between Greece and its international lenders even further, at a time when leading politicians are struggling to build up trust and save the flaiing eurozone nation.
The Prime Minister has repeatedly said that it can’t accept “extreme proposals” from its creditors, who want reforms to pensions and labour markets in Greece.
Mr Tsipras yesterday took to Twitter and added: “Our People have suffered enough during the past five years”.
Greece, a NATO member, has been in possession of the advanced Russian-made systems since the late 1990s and in a defiant show of independence towards Troika, is now negotiating with Russia for the purchase of additional missiles and for their maintenance.
Greece is negotiating with Russia for the purchase of missiles for its S-300 anti-missile systems and for their maintenance, Russia’s RIA news agency quoted Greek Defense Minister Panos Kammenos as saying on Wednesday.
The report followed a visit by Greek Prime Minister Alexis Tsipras last week to Moscow, where he won pledges of Russian moral support and long-term cooperation but no fresh funds to help avert bankruptcy for his heavily indebted nation.
NATO member Greece has been in possession of the Russian-made S-300 air defense systems since the late 1990s.
“We are limiting ourselves to replacement of missiles (for the systems),” RIA quoted Kammenos, who is in Moscow for a security conference, as saying.
“There are negotiations between Russia and Greece on the maintenance of the systems … as well as for the purchase of new missiles for the S-300 systems,” he said.
The Greek defense ministry in Athens later issued a statement quoting Kammenos as saying:
“The existing defense cooperation programs will continue. There will be maintenance for the existing programs.”
Two questions spring to mind:
1. Where is Greece – which is scratching around for every penny to repay The IMF – going to find the cash to pay for these missiles?
We suspect the answer will be a loan from Russia (perhaps for more than the cost) as a roundabout way to provide Tsipras with funds upfront… and
2. Will The ECB accept new missiles as collateral?